George Osborne, the Shadow Chancellor, says the Government should stop new
spending on child trust funds for better off families.

In his speech to the Conservative Party Conference, shadow chancellor George Osborne announced that this savings scheme, which were introduced by Labour, would be limited to just the poorest third in society and those bringing up disabled children.

All children born after September 1 2002 have receive a £250 voucher, which is invested by their parents into a bank or stocks and shares account. On reaching their 7th birthday these children are due to receive a further £250 voucher, with bigger payments – of up to £500 – being paid to those on low incomes.

Parents and grandparents are free to invest a further £1,200 a year tax-free into these accounts.

Mr Osborne estimated described this savings scheme as a luxury that the UK can no longer afford. He said that stopping these payments would save £300m a year – or £1.5bn over the next Parliament.

This proposal by Mr Osborne is part of an expected Tory policy of cutting back on "middle-class" benefits. Mr Osborne also announced that tax credit would no longer be available to families earning more than £50,000 a year. Currently limited help is available to these families in order to help pay childcare costs.

Related Articles

Under the current system a child trust account is automatically opened in the child's name if parents fail to open an account within 12 months. It is estimated that three in 10 parents do not take up this offer – and have an account opened automatically on their behalf.

Children cannot access the money in these accounts until their 18th birthday, although they gain control of the fund and can direct where it is invested from their 16th birthday.

David White, the chief executive of The Children’s Mutual, the largest provider of child trust funds said he was “surprised and disappointed” by this proposal. “The Conservatives are talking about restoring the savings culture, and our evidence suggests this is the most successful savings product ever.”

He said that the CTF has encouraged families across all income groups to start savings for their children on a regular basis. He claims since its launch savings rates for children had trebled. He added that half of those with CTFs with his company were now on track to collect a nest egg of £10,000 by their 18th birthday.

“If child trust funds are restricted this will reverse this trend and could leave tomorrow’s youngsters drowning in a sea of debt,” he added.